The United States has included Brazil in a watch list of countries which are considered not to be doing enough to curb the manufacture and sale of counterfeit consumer products. Pirate industries have flooded the Brazilian market with their fake copies.

Music CD's, videos, designer-label clothing, tennis shoes and hundreds of other products are falsified and sold throughout Brazil, usually by street vendors. The prices for these counterfeit products are far less than the original and this makes them attractive to consumers, especially in a developing country like Brazil.

The problem has become so extensive that an estimated five percent of Brazil's Gross Domestic Product, or some $21 billion, is lost to pirated products. Certain industries, like computer software and music CD's, are especially hard-hit.

Manoel Antonio dos Santos of the Brazilian Association of Software Companies says the industry has seen its market decline dramatically over the past 13 years. "Our statistics show that 58 percent of the income we could be earning is lost to piracy. For every ten copies of software, five are counterfeit…In 1989 we supplied 91 percent of the market, now it is less than 60 percent, and despite our education campaigns, our campaigns on TV, radio, and in the Congress we haven't managed to reduce this amount of piracy at all," he says. "The levels have stayed the same over the past two years because of the lack of effective enforcement."

The association estimates the software industry lost $900 million in 2000 because of counterfeit products. Mr. dos Santos says some of the fake computer products come from abroad, while others are made domestically. "There are two main sources: For console games like Dreamcast and Play Station, 99.9 percent are made abroad, by the Asian Tigers: Singapore, South Korea and Hong Kong. Then there are the CD's for computers which include games and software applications; 99.9 percent are made here inside the country in tiny domestic workshops," he says.

As for the music industry, half of all CD's sold in Brazil are counterfeit, causing a loss of close to $300 million for the industry last year. Once considered the seventh largest music market in the world, Brazil is now in 12th place because of the inroads caused by commercial piracy.

The problem has become so great that the U.S. Trade Representative's Office recently included Brazil in its priority watchlist of countries that are not doing enough to stop commercial piracy and counterfeiting. A spokesman at the U.S. embassy in Brasilia, Terry Davidson, says the main problem is the lack of enforcement. "Brazil actually has good intellectual property rights laws but the enforcement aspects are prompting the concern on the part of the U.S. trade Representative. We're just not seeing effective enforcement of the laws that exist on the books," he says.

Besides Brazil, the priority watchlist includes 14 other U.S. trade partners, including Argentina, Egypt, India, and Russia.

Spokesman Davidson says while Brazil does not run the risk of sanctions, being included on the Trade Office's watchlist should be considered a warning. "The placement of Brazil on the priority watchlist does not, in itself, mean that the U-S is in the process of preparing any kind of economic or trade sanctions," he says. "What it basically is is an alert to the Brazilian government and to Brazilian society that this is a very serious problem and needs to be addressed."

U.S. companies lost an estimated $700 million last year because of counterfeiting in Brazil the largest loss for American firms in the hemisphere.

But Brazil, with a population of 170 million, is a huge and attractive market for pirate industries, meaning that the commerce of counterfeit products is not likely to disappear any time soon.